Charles Gaudet

Charles Gaudet

Competing on Price: Your Biggest Mistake

Tempted to lower your prices to appeal to more clients? Competing on price is a critical mistake.

Let’s think about it for a minute…

Low prices are enticing as a consumer. Sales, discounts, bundles, and so on are all eye-catching. Anyone who has gone through periods of penny pinching has trained themselves to leap on a deal…

But the reasons we find low prices so enticing are all short-term.

Price-sensitive buyers have their priorities backwards.

It’s not about value, quality, a product that will last, or any personal connection to the brand or company…

Price-sensitive buyers will drop you like a ton of bricks if they find someone for a buck cheaper.

And as mother always said: “You get what you pay for.”

The cheap burger doesn’t taste as good (and is likely worse for you). Cheap tools break. The inexpensive consultant doesn’t produce results. The hugely discounted hotel room has bed bugs… And on and on.

It doesn’t necessarily make everything with a low price tag bad, but we’ve all been dissatisfied by a “deal” too enticing to pass up.

As a result, their likely disappointed in the experience and distrusting of the company that provided it.

Then comes the onslaught of bad reviews and poor word of mouth.

Now, think about the same scenario from a business owner’s standpoint… Even if you’re offering a quality product or service, this type of experience is common with the lowest priced option available in any market…

And the psychological connection between “cheap” and “bad” is easy to make.

The opposite is just as true… A Lamborghini may or may not be the best or fastest car available, but the name is synonymous with luxury. These hyper-expensive vehicles are a status symbol that people continue to strive for.

To put it simply, you want to be Lamborghini, not the “everyone’s approved!” used car dealer…

Let’s expand on this idea in a couple of categories:

Brand Perception

Like the Lamborghini example, you can find instances of brands associated with quality (and high prices) across different markets. This is also true of Nordstrom, Whole Foods, and Apple – and people are more than happy to pay for it.

By establishing themselves as premium options in their respective industries, these companies can command premium pricing…

And achieving such a position is no accident! These companies may offer sales and discounts, but they are infrequent – and when it happens, it’s done strategically, with a purpose.

If you’re constantly offering discounts and dropping prices, customers will associate it with your business, and only make a purchase when they can “get a deal.”

Customer Loyalty

If low prices are the only reason people buy from you, you’re not building relationships

The experience is purely transactional, with no “bigger reason” attached. It’s not about associating your brand with their personal identity… Not about the best option to solve their problem…

It’s not about a customer experience that makes them feel special and valued… It’s only about money.

When price is the only driving factor, customers will be quick to buy… But just as quick to go somewhere else to spend a few bucks less. So, competing on price might snag you a few quick sales, but it won’t translate into repeat business or long-term customer loyalty.

Alternatives

So, if you shouldn’t compete on price – what should you do?

To develop lasting customer relationships and establish yourself as a business worthy of premium pricing, focus on quality and experience.

Make sure you differentiate yourself from competitors enough to stand apart… Offer compelling advantages (like additional benefits or loyalty programs) that aren’t just based on price… And focus on such excellent customer service that you build a tribe of loyal customers who wouldn’t dare leave you for something cheaper.

There’s more competition than ever…

More potential customers and clients are available every day…

And through technology, your competitors have greater access to your customer info than ever before…

All of these means that the next company over is working night and day to steal away your market share – and if you want to stay relevant, you have to develop a raving, loyal fanbase that truly want to do business with you.

Competing on price alone simply won’t cut it – and will often do more harm than good. It’s a race to the bottom and a sure fire way to get your customers to wander away at the first sight of the next shiny deal…

More to explore